Ford Motor posted its highest annual income in more than a decade Friday, although fourth-quarter earnings disappointed investors.
The problem for Ford was more one of expectations than execution, as Ford’s results included a lot of good news, but also some increased costs, such as the price of raw materials as well as spending on engineering and marketing, that caught Wall Street analysts by surprise.
As a result of its first earnings miss in two years, Ford (F, Fortune 500) shares fell more than 12% in midday trading. Still, even with that sell-off, shares are up more than 40% over the course of the past 12 months.
Despite the earnings miss, full-year profits for 2010 climbed to $6.6 billion from $2.7 billion in 2009, the best since 1999.
But the company, which recaptured its position as the No. 2 automaker in terms of U.S. sales in 2010, posted a fourth-quarter operating profit of $1.2 billion, or 30 cents a share, excluding special items. That was down from 43 cents a share on that basis a year earlier.
Analysts surveyed by Thomson Reuters forecast earnings of 48 cents a share excluding special items. The result was below even the most conservative forecast of a 36 cents a share profit.
At least part of the fourth-quarter disappointment came from a small loss in its European unit, compared with a profit there a year earlier. Ford had previously said it expected to be profitable in Europe in the quarter.
But Lewis Booth, Ford’s chief financial officer, said a bigger part of the problem was that the company failed to sufficiently communicate to Wall Street the impact of higher expenses.
"We recognized we missed," he said during the conference call to discuss results with analysts and reporters. "We’ll have to continue to do a better job communicating what the outlook is."
CEO Alan Mulally said the company was pleased with full-year results.
"Our 2010 results exceeded our expectations, accelerating our transition from fixing the business fundamentals to delivering profitable growth for all," he said in the company’s statement.
Mulally and Booth both said they expect the company will report better results in 2011 than it did in 2010, but they wouldn’t give any details about how much better. Mulally declined to say whether current forecasts — for a 29% improvement in first quarter earnings and a 15% increase in full-year earnings, were realistic.
For the most part, analysts continued to see more positives than problems at Ford.
"I don’t think anyone doubts your ability to make more money in 2011," said Adam Jonas, auto analyst with Morgan Stanley, to Booth during the conference call.
In a note Friday, Jonas reiterated that he expects Ford’s earnings to jump by more than 50% in 2011 — well above consensus estimates.
Efraim Levy, auto equity analyst with Standard & Poor’s, said it is a significant milestone that Ford’s cash flow and debt repayments during the quarter left it with more cash on hand than total debt for the first time since early 2008.
"It’s a good sign when you have cash available to deploy on product development and overseas expansion, rather than having to scramble for cash," he told CNNMoney. He also wasn’t too worried about Ford missing earnings targets.
"Sometimes after a long string of success, the analysts get a little too enthusiastic," he said. "The fundamental story I see remains positive. Forget the earnings — look at the trend."
Rank-and-file auto workers will benefit from Ford’s strong results as well, as the company announced it would pay profit-sharing bonuses averaging about $5,000 to 40,600 members of the United Auto Workers at its U.S. plants. That’s well above the $450 average they received a year ago.
Despite the disappointing bottom line, Ford’s quarterly sales of $32.5 billion topped forecasts of $30.4 billion, even though they fell from the $34.8 billion in sales a year earlier.
For the year revenue rose to $120.9 billion, up $4.6 billion from 2009, even though the company sold off its Volvo brand during the course of the year. Excluding Volvo sales, revenue rose $17 billion, or 15%.
Ford (F, Fortune 500) was the only U.S. automaker that did not need a federal bailout or a trip through bankruptcy court in 2009. Its rivals — General Motors (GM) and Chrysler Group, have also enjoyed a turnaround, but neither are making the gains with U.S. buyers that Ford has.
Ford also benefited from the recall troubles at Toyota Motor (TM) in 2010, which caused the Japanese automaker to lose market share for the first time since 1999, and drop out of the No. 2 sales position in U.S. sales.
What recession? Hedge fund honcho John Paulson profited more than $5 billion in 2010, possibly the largest haul in investing history, according to a news report.
This means that Paulson was making $158.55 per second last year.
In 2010, more than $4 billion of his profits came from fund investments. Most of his funds contained bets on gold, due to Paulson’s wariness of the dollar’s long-term weakness, based on the Wall Street Journal’s report. He placed much of his own money in gold-focused funds, which rose as much as 45% because of gold’s meteoric rise last year.
Paulson’s take from last year exceeds the $4 billion that he raked in from short bets against subprime mortgages in 2007, according to the news report.
The founder and president of investment firm Paulson & Co. achieved fame and notoriety, for betting against subprime mortgages on the eve of the market crash in 2007. His funds scored gains of as much as 590% from this subprime wager, the news report states.
Other elite hedge fund profiteers in 2010: David Tepper, founder of Appaloosa Management; Ray Dalio, founder of Bridgewater Associates; and James Simons, founder of Renaissance Technologies. Each made between $2 billion and $3 billion last year, reported the newspaper.
Missouri hog farmers have a vision: planeloads of Midwestern pork chops flying to China, landing on the dinner tables of a booming middle class with the cash and appetite for premium protein.
Indeed, trade prospects for pork and beef topped the list of selling points that business and agricultural leaders employed in trying to lure Chinese cargo planes to Lambert-St. Louis International Airport.
“That was a really important part of the package,” said Jason Van Eaton, executive director of the Midwest China Hub Commission, the group working to make St make quick cash. Louis the entry point for Chinese air cargo in the Midwest. “That’s what we led with.”
With the Chinese population approaching 1.4 billion and wealth growing at a stunning rate, the appetite for luxury products is surging. The Chinese are buying high-end appliances, cars, clothes and wine, flaunting them as symbols of their success. Meat producers here hope that prime American meat becomes the next must-have luxury on the Chinese shopping list.
Though hurdles remain
Incumbent leader Laurent Gbagbo’s government has ordered the seizure of the regional central bank’s offices in Ivory Coast in an attempt to retain control of state finances after being cut off from the money used to pay civil servants.
His political rival Alassane Ouattara, who is the internationally recognized winner of the presidential election held nearly two months ago, condemned the move Wednesday.
“This illegitimate and illegal decision to requisition is null and void. Thus, anyone who participates directly or indirectly in its implementation will be subject to sanctions and criminal prosecution,” the statement said.
A spokeswoman at the bank’s headquarters in Dakar, Senegal was not immediately available for comment.
Without access to government funds, it’s unclear whether Gbagbo will be able to continuing paying the country’s military and security forces. Ouattara supporters hope that by stemming the flow of funds to Gbagbo’s government they can force a mass defection.
Gbagbo’s finance minister Desire Dallo announced on state television late Tuesday that the Ivorian government was seizing the regional bank’s offices in Ivory Coast. Employees are to answer to local officials in Ivory Coast instead of the regional bank headquarters in Senegal, the order said.
The bank’s branch in Abidjan was open Wednesday, and dozens of soldiers and military police surrounded the building, only allowing bank employees to enter.
A security guard, who did not want his name used because he was not authorized to speak to journalists, said two top officials in Gbagbo’s government had entered the building to speak to employees.
The Central Bank of West African States, known by its acronym BCEAO, regroups the treasuries of eight West African countries: Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal and Togo.
Gbagbo’s access to state accounts was first revoked in December, when officials said that only representatives of Ouattara’s government would have signing privileges on state accounts payday loans in 1 hour. However, Ouattara officials said despite that action, Gbagbo had been able to still access money from the central bank.
The head of the central bank, a Gbagbo supporter who had been accused of not cooperating with Ouattara, resigned Saturday.
As the political crisis over the disputed election drags on, the two men vying for power in Ivory Coast have increasingly tried to step up the financial pressure on one another. Earlier this week, Ouattara called for a one-month on cocoa exports from the country, which is the world’s largest cocoa producer.
The 15-nation West African bloc of countries known as ECOWAS also has threatened to oust Gbagbo by force if negotiations fail, but has set no deadline for such an intervention.
Ivory Coast was divided into a rebel-controlled north and a loyalist south by a 2002-2003 civil war. The country was officially reunited in a 2007 peace deal, but the long-delayed presidential election was intended to help reunify the nation. Instead, the U.N. says at least 260 people have been killed in violence since the vote.
Human Rights Watch said Wednesday that security forces and militias loyal to Gbagbo have been carrying out systematic killing and rapes targeting Ouattara supporters.
The report cited several witnesses who said that the militiamen would demand to see identity cards of those stopped at the roadblocks and decided to kill them if they had last names from the north of the country, where Ouattara’s support is strong.
Police also targeted midlevel Ouattara party members, arriving at their houses and asking for them by name before kidnapping them, the report said. In some cases, family members were raped during these house calls and several party members were found later in city morgues riddled with bullets, it said.
Gbagbo’s allies have repeatedly denied any involvement in the postelection violence.
Spanish Finance Minister Elena Salgado called a news conference today to discuss the financial system after the government pledged to strengthen the capital of savings banks, or cajas.
Salgado and Deputy Finance Minister Jose Manuel Campa will address reporters in Madrid at 6 p.m. today, the ministry said in an e-mailed statement. They will discuss the financial system, said an official at the ministry, who declined to be named in line with government policy.
Spanish Prime Minister Jose Luis Rodriguez Zapatero on Jan. 11 called on cajas to bolster their capital and said they could use the state’s bank-rescue fund, the FROB, to do so until access to capital markets improves. The lenders may have a shortfall of at least 17 billion euros ($23 billion), rising to 89 billion euros in a stressed case, Moody’s Investors Service said today.
The cajas have been locked out of wholesale debt markets amid investor concern about 181 billion euros of what the Bank of Spain terms “potentially troubled exposure” to construction and real estate. Faced with a surge in its own borrowing costs, the Spanish government is trying to convince investors that shoring up the cajas won’t overburden public finances as it seeks to tame the euro region’s third-largest budget gap.
The government is working on a plan to strengthen the “solvency and credibility” of Spanish savings banks, Deputy Prime Minister Alfredo Perez Rubalcaba said on Jan. 21. Savings banks are scheduled this month to release additional information on risks related to the construction and real-estate industries, where bad loans have surged since the collapse of the debt- fueled housing boom.
Capital Markets
Spain may change regulations to remove “obstacles” to savings banks’ access to capital markets, the FROB said in a presentation to investors last week. It could introduce incentives to “strengthen solvency and capital quality requirements, preparing the entities in advance to meet the most stringent international capital standards and future stress tests,” it said.
If “necessary,” the FROB could grant “temporary support to help entities to raise funds from private investors,” the presentation said. In a “last instance” the facility could provide funds directly in exchange for a stake in the lender on a temporary basis,” it said, adding in a separate statement that its comments were hypotheses and only the government has the power to change legislation.
A Karbon brand ski jacket made in China for a company in Toronto costs more to buy in Canada than in the U.S.
Despite the fact, the Canadian dollar is now at or near par with the U.S. greenback, a price gap persists.
The gap has closed in the three years since the dollar first hit parity with its U.S. counterpart.
But only by about 10 per cent, says Hugh Schure, president of Schure Sports, the Toronto-based designer of Karbon brand skiwear.
That
President Barack Obama wants to cast some light on economic success stories in the shadows of a slow recovery. And he is looking to find some more.
On Friday, the president travels to Schenectady, N.Y., birthplace of the General Electric Co., to showcase a new GE deal with India and announce a restructured presidential advisory board to focus on increasing employment and competitiveness.
Obama is naming GE CEO Jeffrey Immelt as the head of a Council on Jobs and Competitiveness. The panel replaces Obama’s Economic Recovery Advisory Board, which had been chaired by former Federal Reserve Chairman Paul Volcker. Obama announced late Thursday that Volcker, as expected, was ending his tenure on the panel.
Obama, in a statement after midnight, said the council’s mission will be to help generate ideas from the private sector to speed up economic growth and promote American competitiveness.
“We still have a long way to go, and my number one priority is to ensure we are doing everything we can to get the American people back to work,” the president said.
For Obama, the visit to upstate New York is also an opportunity to claim credit for tax, trade and energy policies pursued by his administration as the nation attempts to recover from the worst recession since the 1930s. It’s the first of many treks during the second half of his term that the president is expected to take to put a more hopeful countenance on the economy amid stubbornly high unemployment.
The GE plant is benefitting from a power turbine contract with India announced during Obama’s Southeast Asia trip in November. Immelt also has been an advocate of alternative forms of energy, and the GE facility, the company’s largest energy plant, is the future site of GE’s advanced battery manufacturing program. New battery technology has become something of an Obama pet project as a symbol of innovation, clean energy and job creation.
“This is a company that has brought jobs from overseas back into the United States,” Obama spokesman Robert Gibbs said.
Obama also plans to take note of GE employees as examples of middle class Americans who are benefiting from the payroll tax cut he negotiated with Republicans in a December economics package that retained Bush-era tax rates for all taxpayers.
In Immelt, Obama has a useful corporate ally. As chief executive of a multinational company, Immelt was one of 20 CEOs who met with the president during a daylong summit at Blair House last month. He was one of 14 U.S. business leaders invited to meet with Chinese President Hu Jintao this week at the White House and was among the guests for the lavish state dinner that followed.
In an opinion piece Friday in the Washington Post, Immelt said the restructured council under his leadership would focus on manufacturing and exports, trade and innovation.
“The president and I are committed to a candid and full dialogue among business, labor and government to help ensure that the United States has the most competitive and innovative economy in the world,” he wrote.
His appointment adds another corporate insider to the White House orbit, underscoring the administration’s efforts to build stronger ties to the business community. Earlier this month, Obama named former Commerce secretary and JPMorgan Chase executive William Daley as chief of staff.
The change also signals Obama’s intention to shift from policies that were designed to stabilize the economy after the 2008 financial meltdown to a renewed focus on increasing employment, a vexing task that could affect his re-election efforts. The White House says the board’s mission will be to help generate ideas from the private sector to speed up economic growth and promote American competitiveness.
The advisory board has included past government officials and representatives from labor and the corporate community. Volcker has been a regular White House adviser, though the board itself has met infrequently with the president.
Immelt has been supportive of Obama since the start of his presidency, though his political contributions tend to be bipartisan and he financially supported Hillary Rodham Clinton and Republicans John McCain, Rudy Giuliani and Mitt Romney during the 2008 presidential campaign.
General Electric employees and their spouses, however, supported Obama over any other presidential candidate.
GE is a conglomerate with interests in diversified technology, media and financial services.
The Federal Communications Commission and the Department of Justice on Tuesday approved — with several conditions — a merger of the country’s largest cable operator, Comcast, and broadcasting company NBC Universal.
The FCC voted 4-1 in favor of the deal.
"After a thorough review, we have adopted strong and fair merger conditions to ensure this transaction serves the public interest," FCC Chairman Julius Genachowski said in a statement.
The FCC said the Comcast-NBC Universal combination will be required to take steps to increase competition in the video marketplace. In addition, Comcast (CMCSA, Fortune 500) has committed to expanding local news coverage, expand programs for Spanish-speaking viewers and offer Internet access to schools and libraries.
The lone dissenter, Commissioner Michael Copps, expressed concern that the merger will limit communications choices and drive up costs to consumers.
"At the end of the day, the public interest requires more — much more — than it is receiving," Copps said in a statement.
Comcast also agreed to cease its management of the News Corp., (NWS, Fortune 500) NBC Universal, and Disney (DIS, Fortune 500)-owned video sharing site Hulu - though Comcast and NBC Universal can still maintain a financial stake in the site.
Assistant Attorney General Christine Varney said the move was essential so that, "Comcast cannot use NBCU’s partial ownership of Hulu to diminish its competitive significance."
Varney added that she’s confident in the settlement. "The conditions imposed will maintain an open and fair marketplace while at the same time allow the innovative aspects of the transaction to go forward," she said in a statement.
The merger should be complete by the end of January and the new venture will be managed by Comcast, according to a joint press release from both Comcast and NBCU. Comcast will own 51% of the company, NBC Universal will own 49%, the press release said.
Comcast CEO and Chairman Brian L. Roberts said the company was "proud" and "excited" about today’s FCC decision.
GE (GE, Fortune 500) Chairman and CEO Jeff Immelt said in a statement that he was confident that NBCU would be in "good hands" under Comcast’s leadership.
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